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South African Trade Policy: What can it achieve given supply-side stumbling blocks?

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South African Trade Policy: What can it achieve given supply-side stumbling blocks?

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Trade policy refers to the calculated use of interventionist measures at a country’s border to allocate resources to more productive use. The intention is to change the economy’s incentive structure in a way that will bring about structural transformation, thus facilitating economic growth and development through the more productive use of resources.

In an assessment of economic development policy it is often difficult to separate the impact on economic activity of trade and industrial policy. Industrial policy covers intervention in product and factor markets within the borders of the country. Fiscal investment incentives which could have an impact on domestic investment similar to that of a protective import tariff as a trade-policy measure implemented with the clear intent of encouraging investment, are good examples of such interventions. In developing countries, trade and industrial policy is predominantly used to encourage industrialisation.

The focus of this paper falls on the use of trade policy as part of broad South African economic development policy. The background is an ailing economy that has in recent years not been growing sufficiently to address the need for poverty alleviation through the growth of productive employment opportunities. Although not performing as it should the South African economy remains the most advanced African economy, the dominant economic power in the region, and consequently a strategic participant in various regional integration arrangements.

The intention is not to review the range of trade policy measures used by the South African Government. The paper has the restricted aim of describing the rationale of trade policy and, inevitably, industrial policy, and to identify some fundamental issues and challenges which reveal a fault line in the South African policy approach.

Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.


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